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It reduces the keyspace that needs to be searched when bruteforcing... leading to accounts being compromised more easily. That's about it.

At the same time, I think it's just a really quick/lazy way to prevent SQL injection.

well you have already lost if you try to insert the password into the database without applying a salted hash function on it.

Don't most "web" languages support parameters in the same was .NET does (at least with Sql Server)?